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The WallMal Company has entered into a four-year interest rate swap, with semiannual settlement, to pay a fixed rate of 8 percent per year and receive six-month LIBOR. The notional principal is $50,000,000.
-Refer to Exhibit 15.19. Assume that one year after the swap was initiated the fixed rate on a new three-year receive fixed pay floating LIBOR swap has risen to 9 percent per year, calculate the market value of the 8 percent fixed rate bond based on $100 face value. Settlement is on a semiannual basis.
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